June 3, 2006

Czechs face prolonged post-election deadlock

By Alan Crosby

PRAGUE (Reuters) - Czech voters face weeks of political
uncertainty or even fresh elections after delivering a deadlock
between centre-right and leftist parties in weekend general

Full preliminary results showed the opposition Civic
Democrats won the biggest share of the popular vote but not a
majority in the first elections since the ex-communist nation
joined the European Union two years ago.

The conservative party and its two smaller centrist allies,
the Greens and Christian Democrats, would hold 100 seats in the
200-member lower house -- the same as the ruling Social
Democrats and far-left Communists.

The result is set to disappoint the financial markets as
initial exit polls suggested a clear centre-right majority,
capable of undertaking fiscal reforms economists believe are
necessary to make the country's 6 percent growth sustainable.

"From the market's perspective this is a huge
disappointment because investors expected a centre-right
government," said Lars Christensen, an analyst at Danske Bank.

Making the situation even messier, Social Democrat Prime
Minister Jiri Paroubek refused to concede defeat and threatened
to appeal in court against the election result.

He said sleaze accusations levied against him in the final
days of the campaign were "absurd slander," lambasting the
media for siding with the opposition to undermine him.

President Vaclav Klaus, a conservative who may play a
pivotal role in any coalition discussions, dismissed Paroubek's
threat and said he would hold talks with Civic Democrat leader
Mirek Topolanek on Monday on the election outcome.

The deadlock comes after a heated campaign that underscored
the choice voters faced between bold reforms need to make the
already prosperous and fast-growing country of 10.5 million
more competitive in the global economy or a continuation of a
modest reform of the welfare state.

Paroubek's comments that he may try to rule with a minority
government with Communist support after the vote also raised
eyebrows and helped boost voter turnout to 64.5 percent from 58
percent in the last election in 2002.

The Communists, whose authoritarian Soviet-backed rule
ended in the 1989 "Velvet Revolution," saw their share of the
vote and seats drop significantly but they will remain the
third biggest force in the new parliament.

Only two more parties, the Greens and the Christian
Democrats, passed the 5 percent threshold needed to enter
parliament but they would hold only 19 seats between them.

Some analysts said the election result could force the
Civic Democrats and Social Democrats into a "grand coalition,"
a scenario they say could be acceptable to Klaus.

Others said the Social Democrats may yet win over the
Greens and form a minority centre-left government that would
rely on the tacit support of the Communists. Klaus could also
mediate a deal that would see a technocrat government installed
for a fixed period of time, after which a new vote would be